Are you a foreigner who wants to jump right into registering a company in Bali? That is totally okay. But, first, read this article to avoid the mistakes other foreigners before you frequently make.

If you want to know how to register the company in Bali, head over to our article about company registration in Bali.

#1 Choosing the wrong business classification when registering a company in Bali

It means that you register a business classification that is not under what you actually do. For example, if you register an import-export company but are actually operating a retail shop.

You most probably won’t have any issues getting the licenses with the wrong business classification. Nevertheless, the incorrect licenses do not allow you to operate your actual business legally. 

If the licensing office becomes aware of it, you will get a warning letter and a fine. Also, if you haven’t updated your company licenses within the timeframe given, your company may be dissolved.

Changing the company’s business classification in most cases requires changing all of the company licenses. Thus, the expense will be the same as registering a new company. 

Another risk is that the tax office will classify the business and apply the taxes based on your actual business. For example, if you run a tourism business as a simple consultation business and don’t pay the tourism tax. Afterward, the tax office can apply the tax retroactively and fine you.

How to avoid choosing the wrong business classification for company registration in Bali: 

Understand the types of business classifications available in Indonesia. The business classification must be based on the Indonesia Standard Industrial Classification (KBLI)

There are currently 1.574 business classifications. If you give the proper description of your business activities, Emerhub can assist in choosing the correct classification.

#2 The registered address does not follow the zoning and building permit (IMB) regulations in Bali

The company’s registered address must be in a building that has a suitable building permit (IMB), and the land must be located in the correct zoning. 

For example, you are not allowed to register a factory in a tourism or residential zoning. Your application for company registration will get rejected if the zoning or IMB is incorrect or the building doesn’t have an IMB.

New business people commonly make this mistake. They will sign a building lease before checking if it fulfills the legal requirements for company registration.

The shortest leases for commercial property in Bali start from 1-3 years and require you to pay 100% in advance. Hence, this mistake could have you spending time and money on a property you cannot use. 

How to avoid registering your company with an invalid address in Bali: 

Register your company using a commercial address in the correct zone and have the IMB for the business activity. 

For instance, if you want to register your company for import/export in Denpasar, you must register using an address located in the trading or tourism zone. In addition, the IMB must be for an office. 

Doing due diligence on land and building and registered address requirements helps to avoid this mistake. Learn more about it here before entering into a lease agreement.

#3 Registering a company for the sole purpose of buying property in Indonesia or getting an investor’s stay permit (KITAS)

Registering a company only to buy a property in Bali or get an investor’s stay permit (KITAS) is illegal. Companies with no activities get attention from the Tax Directorate General (DJP) and the Investment Coordinating Board (BKPM). 

In that case, you can get fined. The worst-case scenario is that your company may be requested to shut down. 

The purpose of having a company is only for doing business. The benefits of buying property and getting an investor KITAS are given only to people who invest in Indonesia. 

How to avoid misusing a company registration:

Register a company in Bali only if you have an actual business. There are alternatives to get a stay permit or acquire property in Bali, depending on your specific circumstances. Reach out to Emerhub for more information.

#4 Not appointing a resident director 

Indonesian laws require that each company has at least one resident director. A resident director can be either an Indonesian individual or a foreigner who has applied for a work and stay permit (KITAS).

Not having a resident director means your company does not have a legal representative in Indonesia. Hence, there will be problems when operating the company. Your company will not be able to open bank accounts, file tax reports, enter into agreements, and so on. 

How to avoid appointing a non-resident director for your company: 

If you do not plan to appoint a resident director, there is an alternative. Simply use Emerhub’s resident director service. This will allow your company to continue with its operations.

#5 Thinking that it is mandatory to have an Indonesian director 

If you are living in Bali and running your foreign-owned company as a director with a KITAS, there is no need to appoint an Indonesian director when registering a company in Bali.  

It is not mandatory to have an Indonesian director. Having an Indonesian as a director could lead you to run into issues in operations. That is if you choose the wrong nominee with a bad agenda.  

To illustrate, the nominee director can access your company’s finances and represent the company in detrimental contracts and transactions. It could be impossible to remove them from your company’s documents if the director doesn’t cooperate. 

How to avoid having an unnecessary Indonesian director for company registration:

Find a professional director fitting for your foreign-owned company and disregard their nationality. As long as the foreign director with a KITAS lives in Bali and operates the business, there is no need to appoint a local nominee director. Alternatively, you can use Emerhub’s residential director service.

#6 Registering a company with a friend or acquaintance to have fewer expenses 

Registering one company in Bali for several non-related businesses with a friend could be the faulty first step. With no transparency and professionalism, you could fail to operate your company and lose a dear friend in the process.

Further, you and your friend must do all of the company’s reporting together, despite having two different businesses. You will be liable for each other’s obligations. On this account, it will not be easy to track how each business is actually performing.

Not only friends or acquaintances, but registering with people you do not know is even worse. Some visa agencies offer investors KITAS with no company registration. 

To get an investor KITAS, you must be a registered shareholder in the company. This means that you will agree to share liabilities for the company’s activities and capital with people you don’t even know. 

It will be hard to get your name off the company’s documents since you need their signatures. If they are unreachable, there will be nothing you do about it.

How to avoid registering a company in Bali with a friend or acquaintance:

Spend the money on proper setup to avoid issues and liabilities you cannot control down the line. 

If you still want to share the company with your friend, Emerhub can assist you. We can make sure you have a good shareholders agreement.

Use Emerhub’s company setup service to avoid common mistakes when registering a company in Bali. Fill in the form below or email us at [email protected]. Our consultants will happily reach out to you.

Join our Facebook group — Doing Business in Bali, and share your own stories on mistakes or successes in company registration with other like-minded business people in Bali.

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